How to Report HRA in ITR 1?

House Rent Allowance (HRA) is one of the most significant tax-saving components for salaried employees in India. When filing an Income Tax Return (ITR), correctly reporting HRA ensures that taxpayers claim the appropriate exemption under Section 10(13A) of the Income Tax Act, thereby reducing their taxable income. ITR 1 (Sahaj) is the most commonly used form for salaried individuals with straightforward income sources.

Despite being a widely claimed exemption, many taxpayers are uncertain about how to report HRA in ITR 1. Misreporting can lead to unnecessary tax liabilities, rejection of claims, or scrutiny from the Income Tax Department. This detailed guide explains everything you need to know about reporting HRA in ITR 1, including eligibility, tax benefits, exemption calculation, required documents, and step-by-step filing instructions to maximize your tax savings.

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Table of Content

What is House Rent Allowance (HRA)?

Understanding ITR 1 (Sahaj)

ITR 1 Under the Old and New Tax Regime

Conclusion

Most Asked Questions

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What is House Rent Allowance (HRA)?

House Rent Allowance (HRA) is an amount paid by an employer to an employee to cover rental expenses. It is partially tax-exempt, meaning a portion of the HRA received can be deducted from taxable income if the employee meets the necessary conditions.

HRA is especially beneficial for employees living in rented accommodations, as it significantly reduces their tax burden. However, for taxpayers to claim HRA in ITR 1, they must correctly calculate the exemption amount and report it accurately in their income tax return.

Key Benefits of HRA

• Reduces taxable income, lowering overall tax liability.

• Encourages proper tax planning for salaried individuals.

• Helps renters optimize tax benefits while maintaining compliance.

HRA Exemption Calculation

HRA exemption is calculated as the lowest of the following three amounts:

1. Actual HRA received from your employer.

2. 50% of basic salary (for metro cities) or 40% of basic salary (for non-metro cities).

3. Rent paid minus 10% of basic salary.

Example Calculation (Updated for Clarity)

Component	Amount (₹)
Basic Salary	75,000 per month
HRA Received	30,000 per month
Rent Paid	25,000 per month
City	Delhi (Metro)

HRA Exemption Calculation:

• Actual HRA received: ₹30,000

• 50% of Basic Salary (Metro City): ₹37,500

• Rent Paid - 10% of Basic Salary: ₹25,000 - ₹7,500 = ₹17,500

Exempted HRA: ₹17,500 (least of the three values)

• Taxable HRA: ₹12,500 per month (₹1,50,000 annually)

Understanding ITR 1 (Sahaj)

What is ITR 1?

ITR 1, also known as Sahaj, is a simplified income tax return form designed for salaried individuals with straightforward income sources. It is the most commonly used ITR form by taxpayers who do not have complex financial transactions or business income.

Key Features of ITR 1

Feature	ITR 1 (Sahaj)
Applicable for	Salaried individuals with simple income sources
Income Limit	Up to ₹50 lakh
Eligible Income Sources	Salary, one house property, interest income, and agricultural income (up to ₹5,000)
Ineligible for	NRIs, business income, multiple house properties, capital gains, foreign assets
Ease of Filing	Simple and quick

Who Can File ITR 1?

You are eligible to file ITR 1 if:

• You are a resident individual (not applicable for NRIs or HUFs).

• Your total taxable income is up to ₹50 lakh.

• Your income sources include:

  • Salary or pension.

  • Income from one house property (not applicable for multiple properties).

  • Interest income from savings accounts, fixed deposits, or other sources.

  • Agricultural income up to ₹5,000.

Who Cannot File ITR 1?

You cannot use ITR 1 if:

• Your total income exceeds ₹50 lakh.

• You have income from more than one house property.

• You earn capital gains from the sale of property, stocks, or other assets.

• You have foreign income or assets.

• You have business or professional income.

• You are an NRI (Non-Resident Indian).

ITR 1 Under the Old and New Tax Regime

The new tax regime, introduced in FY 2020-21, offers lower tax rates but removes various exemptions and deductions, including HRA. Here’s how ITR 1 differs under both regimes:

Feature	Old Tax Regime	New Tax Regime
HRA Exemption	Allowed	Not Allowed
Deductions (80C, 80D, etc.)	Available	Not Available
Standard Deduction	₹50,000	₹75,000 (from FY 2024-25)
Income Tax Rates	Higher	Lower
Best for	Those claiming deductions	Those preferring lower rates

Conclusion

Correctly reporting HRA in ITR 1 ensures that salaried employees maximize their tax savings while complying with tax laws. Understanding the impact of the old vs. new tax regime is crucial, as HRA is only allowed under the old tax regime. By following the correct filing process, maintaining documentation, and ensuring accurate calculations, taxpayers can avoid scrutiny from the tax department and optimize their tax benefits.

FAQ

1. Can I claim HRA in ITR 1 under the new tax regime?

No, the new tax regime does not allow exemptions for HRA. If you opt for the new tax regime, the entire HRA component of your salary becomes taxable. To claim HRA, you must file under the old tax regime.

2. What happens if my employer hasn’t included HRA in Form 16?

If your employer has not included HRA details in Form 16, you can still claim the exemption while filing your ITR. However, ensure that you have valid rent receipts, a rental agreement, and bank transaction proofs in case of scrutiny.

3. Can I claim HRA if I live with my parents?

Yes, you can claim HRA while living with your parents if you pay them rent. To validate your claim, make rent payments through bank transfers and have a rent agreement in place. Your parents must declare this rent as income in their tax returns.

4. How do I report HRA in ITR 1 if my rent is paid in cash?

You can claim HRA even if the rent is paid in cash. However, you must obtain signed rent receipts with revenue stamps from your landlord. If your annual rent exceeds ₹1 lakh, you must also provide your landlord’s PAN details.

5. Can I claim both HRA and a home loan tax deduction?

Yes, you can claim both HRA and a home loan deduction if:

• Your rented house is in a different city than your owned house.

• Your owned house is under construction and not ready for occupancy.

• You have rented out your own house and live in another rented accommodation.

6. Is there a maximum limit for HRA exemption?

There is no fixed maximum limit for HRA exemption. However, the exempt amount is determined by the HRA exemption formula, which considers your salary, rent paid, and location (metro/non-metro).

7. Do I need to submit rent receipts while filing ITR 1?

No, you do not need to submit rent receipts while filing your ITR. However, you must retain them for at least six years, as the Income Tax Department may ask for them during scrutiny.

8. Can I claim HRA for shared accommodation?

Yes, HRA can be claimed for shared accommodation, but you must:

• Have a valid rental agreement with your co-tenant(s).

• Ensure your share of the rent is clearly mentioned and paid via bank transfer.

• Collect individual rent receipts from the landlord.

9. What happens if I forget to claim HRA while filing my ITR?

If you forget to claim HRA while filing your ITR, you can file a revised return under Section 139(5) before the deadline. This allows you to correct any mistakes and add missing exemptions.

10. How does the Income Tax Department verify HRA claims?

The Income Tax Department may verify HRA claims by:

• Cross-checking Form 16 and Form 26AS.

• Requesting rent receipts, lease agreements, or landlord PAN details (if rent exceeds ₹1 lakh annually).

• Checking bank statements to verify rent payments.

11. Can I claim HRA if my landlord is an NRI?

Yes, you can claim HRA even if your landlord is an NRI. However, you must deduct TDS (Tax Deducted at Source) at 30% from your rent before paying your landlord and deposit the same with the government.

12. Can an NRI file ITR 1 and claim HRA?

No, NRIs cannot file ITR 1. They must use ITR 2 or ITR 3, depending on their income sources. Additionally, NRIs cannot claim HRA exemption, as they typically do not receive HRA from an Indian employer.